Not only has COVID-19 upended the lives of millions of Canadians, but the pandemic has caused a tidal wave of setbacks: thousands of deaths, closed borders, political conflicts, shuttered workplaces, and economic turmoil. Of course, the Canadian real estate market has experienced this unprecedented crisis in its own unique way too.
Throughout the pandemic, Canada’s real estate market saw months of volatility in which large cities lost residents in droves when the work-from-home phenomenon took hold, with large cities like Toronto seeing record population loss during the height of the pandemic.
As a result, a tsunami of demand flooded smaller, suburban areas, with buyers snatching up the already limited inventory, driving up prices (even higher) in the process.
Fundamental forces of change, such as this, continue to reshape the real estate industry, according to PwC Canada and the Urban Land Institute’s Emerging latest Trends in Real Estate (ETRE) report. The annual survey of the Canadian real estate industry suggests feelings of optimism, with business prospects for 2022 returning to above pre-pandemic levels.
READ: Average Canadian Home Price Forecast to Reach $771,500 By End of Year
While COVID-19 concerns still loom, real estate businesses have proven successful. With the worst of the pandemic behind us, the report says the Canadian housing market has boomed, industrial real estate continues to strengthen, segments of the retail sector fared better than expected, and the office sector, while under continued pressure, has shown some positive signs.
Key Real Estate Trends to Watch
According to the report, Canada’s leading real estate businesses will keep a close eye on the key forces reshaping real estate. This includes the significant shifts in the workplace and ways of working, the increasing significance of environmental, social and governance (ESG), and rising costs and competition.
“Renewed strategies on innovation, transformation and repositioning portfolios are essential for real estate businesses to successfully embrace these disruptions in the industry,” said Frank Magliocco, National Real Estate Leader PwC Canada. “Technology and data analytics can assist with analyzing opportunities of growth and making better-informed investments.”
Richard Joy, Executive Director of Urban Land Institute Toronto, also noted that these trends would have a “transformative” impact on the industry. “Working together to find creative solutions to these challenges will enable real estate leaders to shape the future and uncover new opportunities,” said Joy.
Markets to Watch
While the Vancouver and Toronto real estate markets continue to lead Canadian cities in terms of investment and development prospects, every region has its own opportunities and challenges. According to the report, for the third year in a row, Vancouver remains the top market to watch.
“Investors and developers alike are feeling optimistic given Vancouver’s strong economic outlook, the restart of immigration activity and an abundance of capital,” reads the report.
The next market to watch is Toronto. The Greater Toronto Area’s real estate market is a crucial source of strength from industrial assets to housing as the region’s economy kicks into gear after multiple lockdowns. However, the report says the power of these sectors is also creating challenges for Canada’s largest city.
Other major cities to watch include Montreal, Calgary, Ottawa, Halifax, Winnipeg, Edmonton, Saskatoon, and Quebec City.
Outlook for Canada’s Housing Market
Amid the pandemic, building and buying single-family homes across Canada has been particularly strong, with products moving quickly and prices continuing to rise. While the expectation is that this segment will slow after a buying frenzy during the pandemic, the survey believes activity will remain strong.
Affordability remains an issue, even in cities where it previously wasn’t. As a percentage of household income, ownership costs reached 56.8% for single-detached homes in January 2021, RBC Economics noted in its June 2021 housing trends and affordability report. This was the highest since 1990.
Compared to single-family homes, affordability has improved for condominiums. However, some developers say they are cautious about starting new projects, even with an improving outlook for condos, given cost uncertainties.
“Broadly speaking, real estate players identified multifamily housing as a strong category, and that demand will be steadfast in many cities as people struggle with homeownership affordability,” reads the report.
The survey found a growing interest in single-family rental housing as a means to offset ownership affordability challenges. However, interviewees from this year’s ETRE report are divided on whether single-family rental housing in Canada will be a success, as it has been south of the border.
“Regardless, innovation and collaboration with governments are necessary to help address the affordability crisis in Canada,” the report said.
As the real estate industry navigates these trends and other business pressures — including the growing concern about housing affordability — in 2022 and beyond, real estate companies have an opportunity to “embrace creative solutions to stay ahead of the challenges and plot their growth strategies for the future.”
You can read the full report here.
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